strategic management

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03 March 2011 what is forward linkage & backward linkage ?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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03 March 2011 The concepts of backward and forward linkages were first described by Hirschman (1958). Backward linkages refer to the impact of increase in the output of a downstream industry on its demand for inputs from upstream industries. For example, increased production of passenger cars would boost demand for steel, rubber (tyres), auto components, etc. The impact of backward linkages differs across upstream industries since the downstream industry does not buy inputs equally from all industries. Forward linkages refer to increased production of an upstream industry on requirements of downstream industries. Thus, increased production of petroleum products would make its availability easy for downstream industries that use petroleum products as inputs. The impact of forward linkages is not uniform across downstream industries since their requirements of input from an upstream industry are not uniform. An industry may be strong in its backward linkage effects, forward linkage effects, both of these or none of these.